Accounts for hair and beauty businesses by a Chartered Management Accountant. Revenue per chair and per hour, staff cost as a share of takings, services against retail, and the chair-rent question answered properly. From £95 + VAT a month on the Xero or Sage you already run.
Book a free 30-minute review →In a salon, wages are not one cost among many — they are the business. Most owner-managed salons run somewhere between 45 and 55 per cent of revenue on staff, and the ones in trouble are usually the ones who have never calculated it. Above that range nothing else you do to the P&L will rescue the year; below it, most problems are survivable.
The figure only means something measured against what each person brings in. Two stylists on identical pay, one working a full column and one with gaps all Tuesday, cost the same and earn very differently — and a wages line totalling one number cannot tell them apart. What you want is revenue per stylist per available hour, which is a different question from revenue per stylist, and the one that explains your month.
If a stylist genuinely rents a chair, they trade on their own account: their takings are theirs, your income is the rent, and your turnover is a fraction of what goes through the door. If they are employed, all of it is yours, with the employment costs that follow. The two versions of the same salon look nothing like each other in a set of accounts.
Which it is depends on the substance of the arrangement rather than what the agreement is headed, and HMRC takes a close interest — because the answer decides employment status, PAYE, holiday pay and the VAT position all at once. A salon that believes it is under the registration threshold because the chair renters' takings are excluded, where the arrangement would not stand up, is carrying a liability it does not know about.
Salon services are standard-rated. The main cost of delivering them is people, and wages carry no VAT to reclaim. So once you are above the threshold you hand over a fifth of your service income to HMRC with very little input tax to set against it — which is why crossing that line feels so much worse in a salon than it does in a business that buys stock.
The threshold is £90,000 of taxable turnover on any rolling twelve months, with deregistration at £88,000; both have applied since 1 April 2024. Rolling means it is not about your year end — a strong Christmas can take you over on a twelve-month view that ends in January, and the obligation starts then, not at your accounting date.
There are only two real levers. Retail products carry input VAT you can recover, so a bigger retail mix genuinely changes the arithmetic. And the structure of the business — what is employed, what is rented — changes what counts as your turnover in the first place. Both are decisions to take deliberately, in advance, with the numbers in front of you.
In most salons retail is under a tenth of revenue and is treated as an afterthought, despite carrying better margin than the service that sold it and being the one part of the business that brings recoverable VAT with it. Reported as a single sales figure alongside services it stays invisible. Reported separately, with its own margin, it usually turns out to be either the most profitable thing in the building or dead stock that has been sitting on a shelf for two years — and the two require opposite responses.
Card tips and service charges run through the same terminal as everything else, and in a lot of salons they end up in the sales figure. They are not salon income — they belong to the staff — so leaving them in revenue overstates takings, flatters the staff-cost ratio and quietly misstates both the VAT position and the payroll. The rules on how tips must be handled tightened in late 2024, which makes keeping them out of the sales line and properly through payroll a compliance question as well as an accounting one.
Which day of the week covers its own costs. Whether the stylist you are about to replace was carrying the column or sitting in it. What a chair has to bill to pay for itself. Whether that second site would have worked on last year's numbers. None of these can be answered from accounts filed nine months after the year ends, which is why most salon owners run on instinct and a bank balance.
Utilisation beside takings, so you can see who is full and who has gaps.
The one ratio that decides the year, tracked monthly rather than discovered annually.
With their own margins, because they are two different businesses.
Told before you cross it, not after, so the decision is still yours to make.
Built around rent days, payroll and the quiet weeks everyone forgets.
Small and micro-entity companies, from records already kept.
Peter Edwards here — ACMA CGMA, twenty-five years in finance, most of it as Head of Finance in owner-managed businesses between £3m and £15m. The questions are the same whatever the trade: which part of this makes money, what does an hour of capacity cost, and what happens to cash if next month is quiet. A salon is simply a business where those answers change by the chair.
You deal with me. I take on no statutory or external audit work and I give no specialist tax advice: a disposal, group structuring or personal tax planning belongs with a specialist firm. A salon anywhere in Northamptonshire, Cambridgeshire or the counties around can be looked after in person or remotely.
Seven questions, answered from memory. No logins, no exports: an honest read on whether the numbers behind your salon can be trusted.
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